No In the SUPREME COURT OF THE UNITED STATES OF AMERICA. ELECTRONIC ARTS, INC., a Tulania Corporation;

Transcription

1 No In the SUPREME COURT OF THE UNITED STATES OF AMERICA ELECTRONIC ARTS, INC., a Tulania Corporation; NATIONAL COLLEGIATE ATHLETIC ASSOCIATION Petitioner, v. Matt LAUER, individually and on behalf of all others similarly situated; AL ROKER Respondent, ON A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTEENTH CIRCUIT BRIEF FOR RESPONDENT Team 12 Counsel for the Respondent January 14, 2014

2 QUESTIONS PRESENTED I. Whether the first amendment protects the defendant s right to use plaintiff s likeness. II. Whether, under this court s jurisprudence, former NCAA student-athletes state a valid sherman act claim against the NCAA, where: i. They allege Division I basketball and football programs programs that abide by the rules of the NCAA collectively comprise a market for top collegiate athletic talent; ii. iii. To compete in that market, athletes must agree to remain an amateur; And, because of that agreement, compensation for student athletes is lower than it would be in a competitive market? i

3 INDEX QUESTIONS PRESENTED..i INDEX....ii TABLE OF AUTHORITIES... iv STATEMENT OF JURISDICTION...vi STATEMENT OF THE CASE......vii SUMMARY OF ARGUMENT..... x ARGUMNET I. THE FIRST AMENDMENT DOES NOT PROTECT EA S USE OF LAUER S LIKENESS...1 A. The district court incorrectly ruled on peripheral transformative expressions by considering the totality of NCAA Football, as opposed to Lauer s likeness alone.2 B. EA s use of Lauer s likeness lacks sufficient transformative expression to satisfy the Transformative Use Test 3 II. THE NCAA S AMATEURISM BYLAWS ARE NOT PROTECTED AS A MATTER OF LAW..4 A. Board of Regents does not support the proposition that the NCAA s amateurism bylaws are immune from antitrust scrutiny. In Board of Regents, rules concerning a player s market to which the amateurism bylaws apply were not at issue; thus, its reasoning on the matter is obiter dicta Board of Regents has been construed as adopting a dichotomous approach to analyzing NCAA conduct under the Sherman Act The premise that college athletes must not be paid the foundation of the dichotomous approach was never more than dicta; therefore, the holding of Board of Regents no more supports the application of the dichotomous approach than dicta can be construed as controlling law 8 B. The correct approach to antitrust claims is to apply a structured rule of reason approach, which allows for shifting burdens of proof, and does not outright dismiss player s claims absent actual proof of a procompetitive justification Lauer has identified a relevant market, because he alleges that universities compete to recruit the best players this market has been recognized in other jurisprudence 9 ii

4 2. Lauer has established an anticompetitive harm, because the NCAA s artificial cap on player compensation has hindered competition for players C. In the alternative, even if this Court believes that the Board of Regents approach is the legally correct test, that method should not be followed: The reasoning of Board of Regents is outmoded, and antitrust law is temporally sensitive in its application to distinct markets Modern cases indicate that the foundation for Board of Regents rationale is eroding...12 PRAYER FOR RELIEF...15 iii

5 TABLE OF AUTHORITIES Cases Agnew v. NCAA, 683 F.3d 328 (7th Cir. 2012)....9, 10, 11, 12 Banks v. NCAA, 977 F.2d 1081 (7th Cir.1992)....8 Board of Regents of the University of Oklahoma v. NCAA, 468 U.S. 85 (1984)...5, 6, 7 Brennan v. Concord EFS, Inc, 369 F. Supp. 2d 1127 (N.D. Cal. 2005)...6 C.B.C. Distribution and Marketing, Inc. v. Major League Baseball Advanced Media, L.P., 505 F.3d 818 (8 th Cir. 2007)...3 Comedy III Prods., Inc. v. Gary Saderup, Inc., 21 P.3d 797 (Cal. 2001)...3 Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147 (1st Cir. 1994)...12 Gaines v. NCAA, 746 F. Supp. 738 (M.D. Tenn 1990)...5 Hart v. Electronic Arts, Inc., 717 F.3d 141 (3 rd Cir. 2013)...2, 3 In Re NCAA I-A Walk-On Football Players Litigation, 398 F. Supp. 2d 1144 (W.D. Wash. 2005)...9, 12, 13 Kirby v. Sega of America, Inc., 50 Cal. Rptr. 3d 607 (Cal. Ct. App. 2006)....3 Law v. NCAA, 134 F.3d 1010 (10th Cir. 1989)...8, 9, 11 McCormack v. NCAA, 845 F.2d 1338 (5th Cir.1988)...8 No Doubt v. Activision Publ g, Inc., 574 F. Supp. 2d 1139 (C.D. Cal. 2010)...4 iv

6 Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir.1995)...10 United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956)...9 United States v. Gaudin 515 U.S. 506 (1995)...8 White v. NCAA, No. CV RGK, slip op. (C.D. Cal. Sept. 21, 2006)...10 Winter v. D. C. Comics, 69 P. 3d 473 (Cal. 2003)...3 Zacchini v. Scripps-Howard Broadcasting Company, 433 U.S. 562 (1977)...1 Statutes 15 U.S.C v

7 STATEMENT OF JURISDICTION This Court s jurisdiction is invoked under 28 U.S.C vi

8 STATEMENT OF THE CASE I. The Tulania Suit Former college football players Matt Lauer and Al Roker brought suit against Electronic Arts, Inc. (EA) and the National Collegiate Athletic Association (NCAA) in United States District Court for the District of Tulania. 1 [R. 17]. Lauer and Roker alleged EA violated their right of publicity by profiting from their likenesses in its production of the annual video game series titled NCAA Football. 2 [R. 17]. Lauer and Roker also alleged that NCAA bylaws violated antitrust principles. 3 [R. 17]. II. The Right of Publicity Issue EA s NCAA Football video game creates a virtual world in which users can play with over 100 college football teams and thousands of players. [R. 17]. In order to fabricate an authentic college football experience for gamers, EA strives to construct a game that accurately depicts recognizable teams and appeals to the myriad of fan bases. [R. 17]. The teams appearing in the game are identifiable by name, trademark uniforms, and logos. [R. 17]. The virtual players composing these teams are identifiable by number, position, and miscellaneous data that can be altered by the user. [R. 17]. This miscellaneous data includes the virtual player s height, weight, hairstyle, skin color, hometown, and athletic abilities. 4 [R. 1 Mat Lauer and Al Roker brought suit both individually and on behalf of all others similarly situated. 2 EA alters the video game s title by adding the year with each installment. Lauer and Roker allege their likenesses appear in NCAA Football 2004, NCAA Football 2005, NCAA Football 2006, and NCAA Football Focus is on NCAA Bylaw , which holds that student athletes are disqualified from competition if they accept payment for or allow their name or picture to be used in advertising. 4 Athletic abilities include traits such as speed, agility, passing accuracy, and arm strength. vii

9 17]. The virtual players uniform accessories also accurately portray their real life counterparts. 5 [R. 17]. In addition, gamers can download full team rosters containing the actual player names. [R. 17]. These custom rosters are created by other users, but they are available on EA s Teambuilder website. [R. 17]. A montage appearing in NCAA Football 2006 also contains an actual photograph of Lauer passing to Roker. [R. 18]. The Court is tasked with balancing Lauer and Roker s right of publicity with EA s First Amendment freedom of expression. [R. 5]. In balancing the parties rights, the Court must apply the Transformative Use Test. [R. 8]. This test holds that a work can only be labeled as sufficiently transformative if it adds a new expression. [R. 23]. This new expression cannot simply be a trivial variation. [R. 10]. III. The Antitrust Issue Composed of universities and regional sports conferences, the NCAA serves as the governing body for college athletics. [R. 12]. The NCAA requires all student athletes release their right to profit from commercial use of their images in order to compete. 6 [R. 12]. This right is forever relinquished, even after the athlete has graduated or left the school. [R. 12]. Lauer and Roker alleged that the NCAA schemed with EA to establish a financial collaboration. [R. 12]. This maneuver unlawfully restrained the student athletes from benefitting financially from the commercial use of their images and likenesses. [R. 12]. Collegiate athletes are being commercially exploited with no compensation or authorization. [R. 12]. Lauer and Roker set forth a claim under 1 of the Sherman Act, which requires the allegation (1) that there was a contract, combination, or conspiracy; (2) that the agreement 5 These accessories include helmet visors and sweatbands. 6 The effect of this release continues after the athlete graduates or leaves the university. viii

10 unreasonably restrained trade under either a per se rule of illegality or a rule of reasoned analysis; and (3) that the restraint affected interstate commerce. 7 [R. 12]. IV. The Proceedings Below The United States District Court for the District of Tulania held that Lauer and Roker s right of publicity was outweighed by EA s First Amendment right of free expression. [R. 31]. The District Court also held that Lauer and Roker failed to establish an antitrust claim against EA under the Sherman Act. [R. 31]. The United States Court of Appeals for the Fourteenth Circuit reversed the District Court on both issues. [R. 15]. The Court of Appeals held that Lauer and Roker s right to publicity outweighed EA s First Amendment right of free expression. [R. 15]. The Court of Appeals also held that Lauer and Roker s claim underneath the Sherman Act was sufficient to withstand dismissal. [R. 15]. 7 Tanaka v. Univ. of S. Ca., 252 F.3d 1059, 1062 (9th Cir. 2001). ix

11 SUMMARY OF ARGUMENT I. This Honorable Court should affirm the Fourteenth Circuit s reversal of the district court s dismissal of the first issue and remand the case to the district court for further proceedings for two primary reasons. First, the district court incorrectly ruled on peripheral transformative expressions by considering the totality of NCAA Football, as opposed to Lauer s likeness alone. Second, EA s use of Lauer s likeness lacks sufficient transformative expression to satisfy the Transformative Use Test. II. NCAA argues the Supreme Court has explicitly endorsed its rules prohibiting studentathlete compensation. It is incorrect, however, to assume that this Court s jurisprudence supports that proposition: the support is obiter dicta, found in an outmoded case. That reasoning no longer reflects the realities of major collegiate sports. Collegiate athletes are already compensated for their performance. They are awarded full financial scholarships, and train in modern facilities under coaches receiving multi-million dollar salaries. Players receive abundant nonpecuniary benefits. And yet, the NCAA is engaged in a vast commercial enterprise, and member schools dramatically profit. NCAA rules on amateurism are tantamount to price-fixing. Each university may pay only what the bylaws allow. Players receive minimal compensation in exchange for their efforts. Federal courts have blindly approved such conduct. But this court s jurisprudence does not create two standards in the treatment of NCAA bylaws. The lines between the NCAA s commercial activity and noncommercial activity blur. If such a rule was law, the result would be unworkable. Under general antitrust law, the NCAA s rules are to be subject to a traditional rule of reasonableness analysis. Though sports leagues do x

12 pose somewhat of a problem to antitrust law, and present a paradox in that some anticompetitive conduct is necessary to create a marketable product, that does not then exempt sports leagues or the NCAA entirely from antitrust scrutiny. Rather, plaintiffs must allege plausible anticompetitive conduct. Once they have, the burden then shifts to defendants to show procompetitive justification. This in part requires a ruling on the merits. In short, all that is required is that players claims against the NCAA not be dismissed on the mere pleadings. xi

13 ARGUMENT I. THE FIRST AMENDMENT DOES NOT PROTECT EA S USE OF LAUER S LIKENESS. The Transformative Use Test, as employed by the Fourteenth Circuit, is consistent with and satisfies this Honorable Court s analysis in Zacchini v. Scripps-Howard Broadcasting Company, 433 U.S. 562 (1977). The Zacchini Court was tasked with alleviating tension between a performer s right of publicity and a television station s freedom of expression, prompted by the television station s broadcast of the performer s stunt. Id. at Although the Court did not explicitly engage in interest balancing, the Court ultimately suggested that interest balancing was the appropriate analytical framework. Id. at Moreover, the construction of the Transformative Use Test is also consistent with the test s origin in copyright law because the right of publicity is rooted in the protection of the proprietary interest of an individual in part to encourage such entertainment. See Id. at 573. This aspect of the right of publicity, as the Zacchini Court noted, was analogous to the goals of patent and copyright law, as both serve to protect an individual s ability to reap the reward of his endeavors. Id. at 573. The proper application of the Transformative Use Test, asking whether EA transformed Lauer s likeness into something more than the commercial exploitation of Lauer s likeness, necessitates a finding in favor of Lauer and against EA, consistent with the Fourteenth Circuit s opinion. 1

14 A. The district court incorrectly ruled on peripheral transformative expressions by considering the totality of NCAA Football, as opposed to Lauer s likeness alone. The district court s misguided application and understanding of the Transformative Use Test was properly reversed by the Fourteenth Circuit. The district court s broad application of the Transformative Use Test, as applied to peripheral elements of NCAA Football, is inconsistent with the application of the Transformative Use Test employed by the cases cited by the district court in support of its decision. The court opined that viewed as a whole, there are sufficient elements of EA s own expression found in the game that justify the conclusion that its use of the players images are transformative and, therefore, entitled to First Amendment protection. [R. 25]. The crucial inquiry, however, should actually ask whether EA transformed Lauer s likeness into something more than the mere commercial exploitation of Lauer s economic value, not whether peripheral transformative expressions or gaming interactivity render NCAA Football transformative as a whole. The district court also considered the interactive nature of NCAA Football as a basis for transformative expression. [R. 26]. However, the mere ability to alter a digital avatar, without more, cannot satisfy the Transformative Use Test. Hart v. Electronic Arts, Inc., 717 F.3d 141, 167 (3 rd Cir. 2013). The district court s strained interpretation and application of the Transformative Use Test is flawed because such a reading would allow EA to encroach upon Lauer s likeness without reproach, as long as the product incorporates interactive or creative elements, regardless of how tangential or peripheral the allegedly transformative content is to the blatant misappropriation and exploitation of Lauer s likeness. See id. The district court s conclusion is unpersuasive because the ability to modify the avatar is inconsequential when the popularity of NCAA Football stems from users ability to play as, or alongside preferred 2

15 players or teams. Id. at 168. Lauer s likeness as the default position only strengthens the Fourteenth Circuit s conclusion that realistic depictions of collegiate players are the sum and substance of the digital avatars. Id. The fact that NCAA Football would operate no differently and would be no less expressive if the game depicted imaginary players, rather than well-known and identifiable players like Lauer, further detracts from the suitability and accuracy of the district court s interpretation and application of the Transformative Use Test. The Fourteenth Circuit properly applied the Transformative Use Test in its reversal of the district court s decision, as the district court s broad application of the Transformative Use Test represents a misguided application of the standard. B. EA s use of Lauer s likeness lacks sufficient transformative expression to satisfy the Transformative Use Test. A work is transformative if the work adds new expression. Kirby v. Sega of America, Inc., 50 Cal. Rptr. 3d 607, (Cal. Ct. App. 2006). The proper application of the Transformative Use Test turns on [w]hether [Lauer s] likeness is one of the raw materials from which [NCAA Football] is synthesized. Comedy III Prods., Inc. v. Gary Saderup, Inc., 21 P.3d 797, 809 (Cal. 2001). A depiction of a celebrity must be something more than a merely trivial variation. Winter v. D. C. Comics, 69 P. 3d 473, (Cal. 2003). Lauer s likeness, identifiable in his NCAA Football avatar, is comprised by the combination of both physical characteristics and identifying information. [R. 8]. The dual nature of Lauer s likeness distinguishes the facts before this Honorable Court from C.B.C. Distribution and Marketing, Inc. v. Major League Baseball Advanced Media, L.P., 505 F.3d 818 (8 th Cir. 3

16 2007), which held that publicly available information was protected by the First Amendment against right of publicity claims. Id. at Lauer s NCAA Football avatar closely replicated his physical appearance and identifying information. [R. 8]. The digital avatar replicates Lauer s hair color, hair style, and skin tone, as well as accessories donned by Lauer while playing as a Ole Tulania player. [R. 8]. The inescapable truth is that the digital avatar plays college football in digital recreations of college football stadiums. [R. 8]. The appearance, sights, and sounds are insufficient to transform Lauer s likeness in any significant way. The lack of transformative context weighs heavily in favor of Lauer. See No Doubt v. Activision Publ g, Inc., 574 F. Supp. 2d 1139 (C.D. Cal. 2010) (avatars of rock video game depicted performing the same activity by which the band achieved and maintains its fame). Accordingly, this Honorable Court should affirm the Fourteenth circuit s reversal of the district court s dismissal and remand the case to the district court for further proceedings. II. THE NCAA S AMATEURISM BYLAWS ARE NOT PROTECTED AS A MATTER OF LAW. The NCAA, an unincorporated body comprised of member institutions, governs collegiate athletics. [R. 12.] The NCAA requires student athletes to sign various release forms if they do not sign, they cannot compete. [R. 12.] These forms require each athlete to give up all rights, in perpetuity, to the commercial use of their images, and to forfeit the ability to receive pay for their athletic endeavors while student-athletes. [R. 12.] Because of this, Lauer 8 argues that the NCAA 8 In argument on the antitrust issue of this brief, Plaintiffs, collectively, are referred to as Lauer. This is done for the sake of simplicity in text; all plaintiffs are similarly situated against defendants, bring identical claims, and appeal the same issues. 4

17 and EA engaged in a price-fixing conspiracy, and a group boycott or refusal to deal. This conspiracy allegedly stopped Lauer from receiving compensation for the use of his image to make money after he was finished with intercollegiate athletic competition. In Board of Regents of the University of Oklahoma v. NCAA, this Court wrote now infamous dicta: What the NCAA and its member institutions market in this case is competition itself contests between competing institutions. Of course, this would be completely ineffective if there were no rules on which the competitors agreed to create and define the competition to be marketed. A myriad of rules affecting such matters as the size of the field, the number of players on a team, and the extent to which physical violence is to be encouraged or proscribed, all must be agreed upon, and all restrain the manner in which institutions compete. 468 U.S. 85, 101 (1984). One such rule was that players must not be paid. Id. But Board of Regents dicta misrepresents the realities of the collegiate sports market. Courts have continued to accept that dicta as justification to simply assume that the NCAA s amateurism bylaws are procompetitive, without actual proof. See, e.g., Gaines v. NCAA, 746 F. Supp. 738 (M.D. Tenn 1990). For courts to simply assume that the NCAA s amateurism bylaws are necessary to promote competition is wrong-headed; though these objectives seem procompetitive because they are ostensibly concerned with consumer welfare, a reflexive acceptance of Board of Regents reasoning allows the NCAA to continually flout the Sherman Act, 15 U.S.C. 1, at the expense of college athletes. If not for the NCAA s amateurism rules, compensation for players athletic performance would otherwise be much greater. Rather than 5

18 continuing to apply an exception that has no foundation in law, the correct approach is to subject the NCAA to a traditional rule of reason analysis. 9 A. Board of Regents does not support the proposition that the NCAA s amateurism bylaws are immune from antitrust scrutiny. In Board of Regents, rules concerning a player s market to which the amateurism bylaws apply were not at issue; thus, its reasoning on the matter is obiter dicta. Board of Regents does not stand for the sweeping proposition that the NCAA argues it does: that student-athletes must be barred, during their college years and forever, from receiving any compensation related to their athletic performance as student-athletes. [R. 12.] Admittedly, it is possible that the NCAA s ban on student-athlete pay serves some procompetitive purpose such as increasing consumer demand for college sports. But whether the amateurism rules serve a procompetitive purpose is not at issue; rather, at issue is whether a having any procompetitive purpose should exempt the NCAA s bylaws from antitrust scrutiny, and so warrant a dismissal of Lauer s claims. That approach is misguided. Lauer s plausible allegations to the contrary must be accepted as true at the pleading stage. See, e.g., Brennan v. Concord EFS, Inc., 369 F. Supp. 2d 1127, 1133 (N.D. Cal. 2005). Although Board of Regents does give the NCAA ample latitude to adopt rules preserving the revered tradition of amateurism in college sports, 468 U.S., at 120, blind acceptance of Board of Regents dicta to dismiss Lauer s claims is unfounded. The reasoning in Board of Regents does not have the force of precedent when applied to a players market. 9 For a full discussion of courts misapplication of Board of Regents stated antitrust principles to NCAA amateurism rules, see Daniel E. Lazaroff, The NCAA in its Second Century: Defender of Amateurism or Antitrust Recidivist?, 86 Or. L. Rev. 329, 340 (2007). Mr. Lazaroff, Professor of Law, is the holder of the Leonard Cohen Chair in Law and Economics, and Director of the Loyola Sports Law Institute, at the Loyola Law School, Los Angeles. 6

19 1. Board of Regents has been construed as adopting a dichotomous approach to analyzing NCAA conduct under the Sherman Act. After Board of Regents, conventional wisdom was that there were two ways to deal with antitrust cases against the NCAA: when players markets were at issue, the rules in question were presumptively exempt from antitrust regulation. When the challenged conduct related more to the NCAA s commercial endeavors, the conduct was judged under a traditional rule of reason approach. This reasoning was an extrapolation from the reasoning in Board of Regents. There, this Court wrote: [i]n order to preserve the character and quality of the product, athletes must not be paid, must be required to attend class, and the like. Id. at 102. This suggests that regulations governing player amateurism would be exempt from antitrust scrutiny, but that joint economic action by NCAA members on matters not dealing with the regulation of players would be subject to a rule of reason analysis under Section 1 of the Sherman Act, See id. at 123. Thus, when faced with an obviously commercial rule in Board of Regents, this Court held that the NCAA violated Section 1 of the Sherman Act: the NCAA had limited the number of television appearances for college teams, and for fixing the price for those games, ibid. at 120. The Board of Regents court applied a rule of reason analysis, because sports leagues require some horizontal restraints to preserve competition, and to provide a marketable product. Id. at The college television plan was determined not to promote competitive balance in any significant way and was struck down. Id. at However, rather than applying rule of reason analyses to players market antitrust issues, federal courts adopted the dicta in Board of Regents as license to disregard general principles of 7

20 antitrust law. See e.g., McCormack v. NCAA, 845 F.2d 1338 (5th Cir.1988); Banks v. NCAA, 977 F.2d 1081, 1090 (7th Cir.1992). 2. The premise that college athletes must not be paid the foundation of the dichotomous approach was never more than dicta; therefore, the holding of Board of Regents no more supports the application of the dichotomous approach than dicta can be construed as controlling law. Where previous reasoning is obiter dicta, it is properly disregarded. See United States v. Gaudin, 515 U.S. 506, 522 (1995). The same principle applies here. Dicta does not have the effect of stare decisis. Board of Regents did not address the impact of the NCAA s horizontal restraints and price-fixing in the market to recruit student-athletes: no one in Board of Regents represented student-athletes interests. Thus, because Board of Regents does not have controlling effect, its reasoning should not be extended to allow the NCAA to continue to violate the Sherman Act. B. The correct approach to antitrust claims is to apply a structured rule of reason approach, which allows for shifting burdens of proof, and does not outright dismiss player s claims absent actual proof of a procompetitive justification. The correct approach the approach that aligns with general antitrust law is a rule of reason approach, as used in Law v. NCAA, 134 F.3d 1010, (10th Cir. 1989). Law reasons that the central determination to be made is a balancing of procompetitive versus anticompetitive effects. See id. at Such structured rule of reason approach is applied as shifting burdens of proof. Id. at Once the plaintiff has established that the conduct in question has the effect of restraining competition, the burden then shifts to the defendant to establish a valid, procompetitive justification. Id. The purpose of this inquiry is to determine whether a restraint on competition is reasonable. Id. 8

21 To establish a claim under the rule of reasonableness approach, Lauer must therefore (i) identify a relevant market, and (ii) must allege an anticompetitive harm. See id. If Lauer succeeds, he has then stated a valid and legally cognizable Sherman act claim. Each element is addressed in turn below. 1. Lauer has identified a relevant market, because he alleges that universities compete to recruit the best players this market has been recognized in other jurisprudence. Courts have reasoned that major collegiate athletics comprises a market when applied to players marketing themselves to the NCAA s individual member schools. In Re NCAA I-A Walk- On Football Players Litigation, 398 F. Supp. 2d 1144, 1150 (W.D. Wash. 2005). In In Re NCAA I-A Walk-On Football Players Litigation, the court reasoned that Division I-A football was a market; further, the court noted that a relevant product market includes the pool of goods or services that enjoy reasonable interchangeability of use and cross-elasticity of demand. Id., citing, United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, (1956). Applying that definition of a market here, the Fourteenth Circuit correctly held that Lauer had stated a distinct antitrust market. Division I football and basketball programs routinely compete to recruit the best athletes. [R. 14.] To attract the best, programs offer non-monetary incentives: scholarships, state-of-the-art training facilities, and the opportunity to compete on a national stage. A players market has been recognized elsewhere. In Agnew v. NCAA, the Seventh Circuit recognized the existence of such a market. 683 F.3d 328, (7th Cir. 2012). 10 The 10 The Agnew court dismissed the plaintiffs claims, because they failed to identify the market however, as mentioned above, Lauer has stated the prima facie existence of such a market. And the court in Agnew did recognize that such a market existed, ibid. 9

22 court said that colleges do, in fact, compete for student-athletes and the only reason colleges don t engage in price competition for student-athletes is that other NCAA bylaws prevent them from doing so. Id. Thus, this activity recruiting, scholarship awards and the like took place in a relevant Sherman Act market. Id. at It is true that scholarships, state-of-the-art training facilities, and other opportunities serve as a form of compensation. However, these benefits only underscore the point that the players compete in a market. Since Lauer has identified such a market, the next inquiry is whether he has suffered a cognizable antitrust harm. 2. Lauer has established an anticompetitive harm, because the NCAA s artificial cap on player compensation has hindered competition for players. Generally, the test for harm to competition is whether consumer welfare has been harmed such that there has been a decrease in allocative efficiency. Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1433 (9th Cir.1995). Here, this criterion is satisfied, because the NCAA s bylaws have caused an artificial cap that has hindered competition in the market for studentathletes. For example, in White v. NCAA, the court denied the NCAA s motion to dismiss in an antitrust challenge to its cap on financial awards to student-athletes. White v. NCAA, No. CV RGK, slip op. at 4 (C.D. Cal. Sept. 21, 2006). The court reasoned that the plaintiffs had sufficiently alleged NCAA market power college football and major college basketball. Id. at 3. Plaintiffs alleged there were no reasonably interchangeable substitutes for those sports; therefore, the court ruled that plaintiffs had alleged enough harm to competition to survive a motion to dismiss. Id. at 4. 10

23 That same reasoning applies here. Lauer has alleged a legally cognizable antitrust harm, one that the Sherman Act guards against. NCAA rules forbid monetary compensation to any student athlete for his athletic performance. [R. 12.] Other NCAA rules bar the commercial use of his name, image, and likeness. [R. 12.] These prohibitions restrain competition in the collegesports market for Division I student-athletes. [R. 14.] Because of these anticompetitive effects, the players market suffers a distinct harm, in that the price that colleges pay for elite athletes is artificially capped. This results in lower compensation for the student-athletes than would prevail in a more competitive market. Without the anticompetitive practices of the NCAA, the compensation would be greater. NCAA member colleges derive benefits from student athletes, and limit the compensation that the athletes receive in return. For example, in Agnew, the Seventh Circuit recognized that two former college football players correctly alleged that the NCAA s scholarship rules stifled competition among NCAA schools in the market for student athletes. 683 F.3d, at 347. The court reasoned that no knowledgeable observer could earnestly assert that big-time college football programs, competing for highly sought-after high school football players, do not anticipate economic gain from a successful recruiting program. Id. at Since Lauer has alleged a cognizable market and harm, he has satisfied his burden of pleading plausible anticompetitive conduct. Under a traditional rule of reasonableness approach, the burden is then on the NCAA to prove a procompetitive justification. Law v. NCAA, 134 F.3d, at Lauer s claims ought therefore to survive a motion to dismiss, and the Fourteenth Circuit was correct in so holding. 11

24 C. In the alternative, even if this Court believes that the Board of Regents approach is the legally correct test, that method should not be followed: The reasoning of Board of Regents is outmoded, and antitrust law is temporally sensitive in its application to distinct markets. A test that attempts to draw a clean distinction between certain of the NCAA s while exempting others necessarily paints with too broad a brush. This is true because the transactions between NCAA schools and student-athletes are at least partly commercial in nature. Agnew v. NCAA, 683 F.3d, at Thus, there is no possibility of applying a perfectly dichotomous approach: there is no clear line of demarcation between commercial and non-commercial NCAA activity. Nonetheless, even if the rationale of Board of Regents must be adhered to, one can see that its arguably once relevant justification is now outmoded. In other words, even if Board of Regents s reasoning would apply, that case is no longer very helpful. Antitrust law focuses on markets only during specific periods. Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1184 (1st Cir. 1994). Because Board of Regents justifications are no longer worth accepting at face value, Board of Regents offers limited guidance in determining the impact of the NCAA s ban on student-athlete pay on the demand for college sports today. 1. Modern cases indicate that the foundation for Board of Regents rationale is eroding. The erosion of Board of Regents approach can be seen developing in the district courts. In, for example, In Re Walk-On Football Players, walk-on football players challenged the NCAA s rule limiting the number scholarships each team may award the NCAA rule limits the number at eighty-five. 398 F. Supp. 2d, at The court reasoned that the NCAA is not exempt from Sherman Act scrutiny, and that financial aid to college students should be regarded as commercial activity. Id. at The court denied the NCAA judgment on the pleadings, 12

25 because it reasoned that rules concerning the number of scholarships were qualitatively different from rules dealing with attending class or entering the professional draft; the court accepted the plaintiff s contention that the cap on scholarships was motivated by cost containment rather than a promotion of competitive balance. See id. Although the court stated that athletes may not be paid to play, ibid. at. 1148, the reasoning of the court in In Re Walk-On Football Players clearly indicates a shift in realization about the NCAA s activities: the court recognized as commercial what previous court may not have seen as commercial the limitation on the number of scholarships. Id. at This was a limitation on players, an area of NCAA limitation that courts had previously treated as sacrosanct. What In Re Walk-On Football Players suggests is that the clear line of demarcation between NCAA activities that are protected under Board of Regents dicta, and those that will face antitrust scrutiny, is beginning to blur. Without a clear test such as a structured rule of reason approach, courts will blindly sanction some activity as procompetitive without any inquiry into the actual effects of the activity, and strike some activity as anticompetitive such disparate approaches could be called none other than arbitrary. CONCLUSION The Supreme Court should uphold the Fourteenth Circuit s well-reasoned opinion. the district court incorrectly ruled on peripheral transformative expressions by considering the totality of NCAA Football, as opposed to Lauer s likeness alone. Second, EA s use of Lauer s likeness lacks sufficient transformative expression to satisfy the Transformative Use Test. Moreover, that court correctly held that Lauer stated a claim under the antitrust act. Since those bylaws are not protected as a matter of law, the NCAA s motion to dismiss should not have been 13

26 granted by the district court. The Fourteenth circuit correctly reversed the district court s judgment. 14

27 PRAYER FOR RELIEF For the above reasons, the Court of Appeals should be UPHELD. Respectfully submitted, Team 12 Counsel for Respondent January 14,